5 stupid steps toward retirement poverty
October 19, 2009 by Jim GiulianoPosted in: In this week's e-newsletter, Latest News & Views, Money
Unless you have plans to spend your Golden Years working under the Golden Arches, it’s time to consider the strategies for a prosperous retirement.
Investment-adviser Web site motleyfool.com recommends you avoid these five mistakes to give yourself a better chance at building a comfortable nest egg:
- Procrastinating. Those who fail to plan … well, you know the rest. A surefire way to make mess of retirement planning is to avoid retirement planning. Putting it off “for a couple of days” soon turns into a couple of years, and the next thing you know, you’re pawning that gold watch for a couple of cans of tuna — and not the fancy albacore, we might add.
- Skipping an employer plan. If your firm has a 401(k) or similar plan and you’re not in it, hit yourself in the face with your fist. If your firm has a matching-contribution plan and you’re still not in it, use a baseball bat instead of your fist. You’re missing out on tax savings, compounding and free money. If you have the money taken right out of your paycheck, you’ll hardly miss the amount after a while.
- Saving for college first. Look at it this way: If you put all your spare money into a college fund for your kids, do you think they’re going to fund your retirement? Good luck with that. That’s not to say you shouldn’t try to save for your children’s education, but your retirement is the first priority.
- Investing too conservatively. The recent market meltdown was enough to scare anyone into putting money into only the safest — and lowest paying — investments. Most advisers say that’s a mistake, especially if you’re more than five years from retirement. Putting your money in blue chips is OK, however. Better there than in ultraconservative holdings.
- Investing too aggressively. This of course is the flip side of the too-conservative approach. Some may feel they have to catch up — quickly — for recent market losses by taking chances on risky stocks. Don’t do it. Stick with solid, moderate-risk investments. And the diversity rule is: Don’t put yourself in a position where the failure of one part of your investments dooms your whole portfolio.
Tags: 401(k), investing, retirement
October 26th, 2009 at 10:35 am
Saving for college first: My mother saved for college first and is now saving for retirement. Now that she has helped me, rest assured that she will never have to go into a nurse home and will have nothing to fear about her retirement.
October 26th, 2009 at 12:36 pm
Joe, this is the ideal. Mom probably knew what her son is made of when she saved for his college first – BUT – should things not turn out as you intend and if she happens to not get an adequate amount saved for retirement, that leaves her without the security you both want for her. We don’t know what life holds, so I agree the wise thing is to have the retirement funds building up and let funds for education take a secondary spot.
October 27th, 2009 at 11:39 am
Or you could apportion your funds toward both, college and retirement savings. Once your child is out of college, put it all into retirement.
October 27th, 2009 at 12:09 pm
Or you could be selfish like me and my husband. Don’t have any kids, don’t pay for college. Put it all in the retirement fund so when we don’t have to work we can actually go have a little fun.
November 13th, 2009 at 10:23 am
We actually have a few employees that don’t take advantage of the match. Where else can you get an instant 50% return on your money?
November 13th, 2009 at 3:21 pm
My company actually matches 100%…can’t believe we still have a few that don’t take advantage! My husband and I are both taking advantage of our employers’ generosity with our retirement funds. we have investment properties that will (at least partially) fund DD college. We want to have our cake and eat it too!